ITI Mutual Fund has launched its latest offering: ITI Value Fund. At a time when markets are scaling new highs, it is pertinent to note that ITI MF is the only fund-house to launch a value investing oriented product. The value funds category is dominated by schemes such as ICICI Pru Value Discovery, L&T India Value, Invesco India Contra, UTI Value Opp. and Tata Equity PE. ITI MF has a deep connection with two of the biggest value funds and it remains to be seen whether IT Value Fund can get closer to that glory in future. Read on to know more about it.
Why invest in value funds
Value funds generate returns from potential rerating and earnings growth.
They participate in turnaround success of companies that may be out of favour.
Value funds adopt a disciplined approach during volatility with cash.
A high margin of safety means that relative downside is limited and upside is high.
Value funds are long-term bets. So, do not look at 1-2 years returns. It is better to look at their returns on a 5-year basis or more. You can do SIPs in value funds with money that you do not need in 5 years. Sometimes, value funds may take longer than 5 years to show good returns.
Value funds should form the satellite part of your portfolio. Satellite portion is about 10-20 per cent of the overall portfolio. Those with higher risk appetite, can obviously take larger positions.
Where value funds invest
Value funds like ITI Value bet on great companies going through temporary tough times and trading at prices significantly below their intrinsic value.
They focus on stocks where deleveraging and improvement in RoEs/cash flows visible.
Value funds also take positions in emerging sectors with growth potential available at significant value.
Its a game of patience. ITI Value Fund may continue to retain the stock in the portfolio as long as fundamentals are intact and valuation is reasonable.
Fund managers and CEO
Pradeep Gokhale joined ITI Asset Management Ltd. in November 2018. He has over 23 years of extensive experience in Fund Management, Equity Research, Credit Evaluation and Ratings. He has been associated as a Key Management Personnel at Tata Asset Management Ltd. for 15 years and his last role was in the capacity of Senior Fund Manager – Equities. Pradeep managed Tata Equity PE, a very popular value fund in his stint at Tata MF.
CEO George Heber Joseph joined ITI Asset Management Ltd. in November 2018 and is responsible for the entire business of ITI Asset Management Ltd. Prior to joining ITI Asset Management Ltd., he has worked in companies like ICICI Prudential Asset Management Ltd. At ICICI Pru, George managed ICICI Prudential Value Discovery Fund, the biggest value fund in MF space.
ITI Value Fund features
ITI Value Fund will have top down sector allocations based on macro drivers.
The fund will have stock level limit in a way that it is 7% – Large Caps, 5% – Mid Caps, and 3% – Small Caps at the time of purchase.
The ideal investment horizon is 3 – 5 years.
The fund will deploy value investing strategy across market caps.
A strong bottom up stock selection approach is expected to focus on price-value gap, leading to better payoffs.
ITI Value Fund opened for NFO subscription on May 25 and will close on June 8. After a few days, it will reopen for ongoing subscriptions.
